Exploring Your Options: An Introduction to Travel Trailer Financing

Are you a Canadian looking to hit the open road this summer? You’re not alone. At least 2.1 million households in the country own an RV. However, do you dream of doing a cross-country tour in your travel trailer but need help financing the travel trailer purchase? We’ve got your back.

This guide will take you through everything you need to know about travel trailer financing, from understanding the different loan options available to knowing how to get the best deal when it comes time to buy.

We'll even share tips for finding the easiest way to apply for a travel trailer loan. So whether you're an experienced traveler or brand new to RVing, this article will provide valuable insight into making your dream a reality.

Vacation Travelers: Are They a Good Investment?

Vacation trailers can be a smart investment option, yes. This is especially true if you're looking for an affordable way to travel and explore the country or enjoy outdoor activities like camping, fishing, and hiking. In a country like Canada, you don't want to miss out on the Great Outdoors, and a vacation trailer is a fantastic way to explore what this country has to offer.

Considering that these trailers offer savings on accommodation costs and come in various shapes and sizes, they can be a great practical solution for people who love to travel but don't want to spend money on hotels or other amenities. Ownership also gives you more freedom over where you stay (and for how long) instead of booking accommodations daily.

Furthermore, these travel trailers often appreciate value over time, so there is an opportunity for financial gain in the future.

Consider, though, that vacation trailers come with ongoing maintenance and repair costs that might be too much of a burden for some people. However, in most cases, if you treat the road traveler like a car and stay on top of maintenance, you should be fine.

Travel Trailer Financing Options

Investing in a travel trailer can be an exciting experience and a great way to explore the world. However, looking into your financing options before buying one is important. After all, buying an RV (even one that's used) can easily come with a price tag of over $60,000.

If you don't do your research when looking for RV finance options, in this case, you could end up with overly high-interest rates or a repayment schedule that doesn't fit your budget. This would make it hard to keep up with payments and defeat the purpose of your great investment.

Here are two main factors to consider when looking into travel trailer financing.

Secured vs. Unsecured Loans

Deciding between secured and unsecured travel trailer loans can potentially make or break your budget.

When approved, secured loans are backed by an asset like a car, house, or bank account. That means if you default on your loan payments, the lender has the right to take possession of that asset. Unsecured loans don't need collateral. However, they typically come with higher interest rates and stricter repayment terms because of the lack of security for the lender.

Our top tip here? Before committing to any travel trailer loan, consider your financial situation and ensure you understand all the associated fees and other details.

For example, an unsecured loan may be better if you want more flexible terms, such as longer payment periods. This could be helpful if you don't have the budget to pay off the loan quickly.

Conversely, a secured loan backed by your travel trailer may be the right choice if you hope to build or maintain an excellent credit score. The interest rate is usually lower than an unsecured loan so you can save money in the long run.

Fixed vs. Variable Interest Rates

Once you've chosen the right loan for your needs, you'll also need to consider the interest rates for each type of loan.

Fixed rates allow borrowers to know exactly how much their monthly payments will be, creating certainty for budgeting and planning purposes. On the other hand, variable interest rate loans can offer more flexible terms since the interest rate moves with the market rate. This means your payment amount could go up or down depending on the Canadian economy.

What's the right choice in this case? It's tough to say. Fixed-interest rates are great if you don’t want to worry about ever-changing market conditions. With a fixed rate, your payments will always stay the same, no matter what. Because financial markets have been notoriously volatile recently, this might be a good idea if you favor stability.

On the other hand, variable rates can start lower than fixed rates, so you can save some money each month by opting for a variable rate. However, variable rates fluctuate throughout the loan period, which could either work in your favor or put you in a worse spot, depending on different circumstances.

How Do RV Loans Work?

RV loans are unique since RVs, and other recreational vehicles (like boats and campers) are considered luxuries and often depreciate quickly. Because of that, lenders generally require higher down payments for RV loans than regular car or home loans and higher interest rates.

Aside from that, they work similarly to other types of loans. To qualify for a loan, you'll need your:

• Credit score
• Income history
• Assets to prove to the lender that you can make all the required payments

Additionally, since RVs can experience more mechanical breakdowns than most cars, many lenders also require some form of extended warranty insurance to accompany the loan. However, that's not always the case. That's why it's worth researching various options if you're considering taking out an RV loan. Shop around and ensure you get a deal with repayment terms and fees.

How Long are Road Traveler Loans?

Travel trailer loans usually range from just a few months to multiple years. It all depends on your specific loan terms and the type of travel trailer you plan to purchase.

It would be best if you aimed for a loan long enough to enjoy the investment without being a financial burden. For example, if you only enjoy the travel trailer for a few consecutive months out of the year (during the summer, for example), consider obtaining a financing option with a shorter repayment term.

However, if your vacation trailers are being used year-round and you want them to last multiple years, longer loans provide more payment flexibility. Because you're getting consistent use out of your travel trailer purchase, it's worth the longer loan term.

Ultimately, finding an ideal loan length depends on understanding your short and long-term goals surrounding your investments in travel trailers. Speaking with a financial counselor or loan officer is a great way to ensure you make the right decision for your and your family's financial needs.

How to Find the Right Travel Trailer

It’s not just about finding the right funding. You also need to ensure you’re investing in a travel trailer you love. You know, one that’s got all the features you’re looking for and is in good enough shape to last you for years.

This is where many people fall short in their search. If you’re struggling to find the right vehicle to finance, follow these five steps.

Determine Your Budget

Setting a budget is a good way to start your search. It’ll provide some parameters that make your search easier and quicker. After all, you don't want to look at vehicles you know you can't afford. But how can you create a great budget in this case?

Considering the cost of the vehicle and other fees (such as insurance), set a financial limit based on what you can honestly pay each month. This ensures that financing won’t overwhelm you after making the purchase. Additionally, if you set aside more funds ahead of time, you could be eligible for better interest rates or even waived fees in some cases.

RV vs. Camper

If you know how much you can spend, take some time to consider whether you'd like an RV or camper. Yes, they're different.

RVs are great for long road trips as they usually have on-board bathrooms and kitchens that allow you to travel comfortably in your second home. Meanwhile, camper vans are smaller and more compact, making them well-suited for shorter trips or weekend getaways.

New vs. Used

Finally, decide whether you're interested in a new or used vacation traveler. Used travel trailers are obviously cheaper. However, if you're not careful about selecting your vehicle, you could pay more in the long run due to higher maintenance fees or mechanical issues.

New travel trailers are more expensive but come with brand-new parts. This means that your investment will likely last longer, and you won't waste money on repairs each month. However, their higher price tag could mean you'll need to take out a bigger loan or even come up with a larger down payment.

Apply for Travel Trailer Financing

Ready to apply for travel trailer financing to get your dream travel trailer? We can help. At NLP Finance, we've made it simple to access financing online if you live in Newfoundland and Labrador, Nova Scotia, New Brunswick, Ontario, or Alberta.

Not only do we make it easy to get pre-approved for a loan in no time (literally minutes), but we also offer some of the best rates available due to our lending partners. Whatever your credit history, we want to work with you to ensure you get the right financing.

Make your travel trailer dreams a reality today with our E-Loan program! Click here to get started.